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BDC FS Investment Corporation Begins Public Trading

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April 18, 2014 - 11:35pm
 

FS Investment Corporation (ticker:FSIC) is a Business Development Company (BDC) which was formed in 2007 and commenced operations in 2009. On April 16th existing shareholders became free to sell their shares into the public market as shares were listed on the NYSE.  There are no new shares being offered as the BDC comes public, but the last shares sold in private offerings were sold for $10.80/share.  Similtaneously with the start of public trading the company made a tender offer for up to $250 million in shares in a dutch tender--for a price of not less than $10.35 nor more than $11.

FS Investment Corporation is a venture of Franklin Square Capital Partners and GSO Capital Partners (which is the credit arm of Blackstone).  The BDC is the 4th largest publically traded BDC with $4.4 billion in assets as of 12/31/2013.  FSIC primarily makes secured loans to less than investment grade private companies--over 70% of their investments are senior 1st or 2nd lien loans.

FSIC will pay monthly dividends and has been paying 7.2 cents/share per month and recently announced an increase to 7.425 cents/share (correction from earlier)--additionally the company announced that they will be paying a special dividend soon.  The current yield on 7.425 cents/share per month equals a current yield of 8.7% (this does not include any special dividends which may be paid.

Given the quality management and advisors to FSIC it would appear that this issue should go on our watch list for potential purchase and we will be keeping our eye on the issue.  As you may recall we consider BDC's to be reasonable holdings in a flat to slowly rising economy, while we believe that they should be sold when economic growth is waning and there are possibilities of recession in the near future.

The shares have traded in a range of $10.00 to $10.30 the 1st 2 days of trading on heavy volume.  Volume should settle down in a few days and the price will likely land right where it closed on Thursday ($10.21).

We have added FS Investment Corporation to our BDC List.

 

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